Off-price craze driving foot traffic to Marshalls, Macy’s

Consumers shopped more in stores in the second quarter this year compared to the first, favoring home improvement big box stores and mall stores, according to a report from location-based advertising platform GroundTruth emailed to Retail Dive. May saw the largest increase with a 1.1% gain in foot traffic, correlating with the highest monthly retail sales growth in over eight months.

Within fashion, off-price retailers performed well, along with Marshalls, Old Navy, Gap Body, Coach and Macy’s, which saw the largest increase of foot traffic. Saks Off Fifth and Macy’s Backstage also saw a 0.5% uptick, while mid-tier apparel and accessory brands lost some ground, according to the report. Despite that push into “value retail,” however, luxury brands, including Coach, Cartier and Prada, saw a small gain, possibly due to graduation shopping, GroundTruth said.

And convenience was a major driver, as typified by Kohl’s traffic, according to the report. Since the launch of the Kohl’s-Amazon partnership last year, Kohl’s locations that offer Amazon returns have seen a 0.8% increase in foot traffic share.

Dive Insight:

From Jan. 1 through June 30, GroundTruth analyzed unique offline visits to more than 250 retail brands across the apparel, department store, luxury, beauty, footwear, kids, big box, pharmacy, convenience and off-price sub-categories. The findings reveal the strength in off-price retail, the prospect of a department store resurgence and the importance of physical retail.

Department stores in recent years have hemorrhaged sales, donating most to off-price rivals, as they continued to rely on what Moody’s analysts have called outmoded formats and supply chains that weren’t keeping pace with customer demand. Last year, Moody’s also warned on margins, which are hammered by the higher costs of e-commerce.

That has led department stores to invest in e-commerce to the point where they’re now outpacing wider retail in transacting 22% of total sales online — compared with closer to 13% for the industry as a whole, according to a recent Moody’s report on the sector. But GroundTruth’s report suggests that brick-and-mortar, where logistics are easier and cheaper, is not to be neglected.

Even with a massive reduction in its footprint over the last two years or so, Macy’s is poised to accommodate a large number of store shoppers nationwide, and it appears to be attracting them. Macy’s increased its share of department store visitors in the second quarter, while its primary rivals lost foot traffic share, GroundTruth found. “Despite the recent wave of store closings, Macy’s reputation as a lower-cost alternative to brands like Neiman Marcus and Saks Fifth Avenue may allow them to ride the wave of off-price retail momentum,” according to the report.

In a finding that underscores the importance of back-to-school, seasonal needs also send shoppers to stores, GroundTruth found. Although overall apparel and accessories retailers lost foot traffic in the quarter, seasonal brands like Sunglass Hut thrived, and prom and wedding season gave Men’s Wearhouse a boost, according to the report.